SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 1996
Commission File Number: 0-16415
CUMBERLAND HEALTHCARE, L.P. I-A
(Exact name of Registrant as specified in its Charter)
Delaware 59-2660778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices)
Registrant's telephone number, (813) 573-3800
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of Units at
Title of Each Class March 31, 1996
Units of Limited Partnership
Interest: $1,000 per unit 30,000
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1995 Form 10-K, filed with the Securities and
Exchange Commission on April 12, 1996, Parts III and IV - Form S-
11 Registration Statement and all amendments and supplements
thereto File No. 33-4301
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
ASSETS (Audited)
Cash and Cash Equivalents $ 2,754,052 $ 1,626,628
Restricted Cash 33,196 59,272
Accounts Receivable (Net of Allowance of
$73,373 and $73,373) 996,751 705,511
Prepaid Expenses 65,936 74,681
Deferred Debt Costs (Net of Accumulated
Amortization of $47,196 and $42,336) 66,234 71,094
Intangible Assets (Net of Accumulated
Amortization of $36,059 and $33,285) 407,739 410,513
Investment Properties, at Cost (Net of
Accumulated Depreciation and Amortization
of $11,415,605 and $11,235,282) 19,084,705 19,159,419
Construction in Progress 7,722 74,324
Total Assets $ 23,416,335 $ 22,181,442
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 1,258,610 $ 955,713
Accrued Payroll 238,614 236,217
Interest Payable 33,431 34,646
Payable to Related Parties
- General Partner 11,053 11,054
- Affiliates 353,899 346,399
Mortgage Note Payable 7,869,302 7,946,917
Minority Interest 655,604 675,458
Total Liabilities 10,420,513 10,206,404
Partners' Equity:
Limited Partners (30,000 units outstanding
at March 31, 1996 and December 31, 1995)
13,261,985 12,261,618
General Partner (266,163) (286,580)
Total Partners' Equity 12,995,822 11,975,038
Total Liabilities and Partners' Equity
$ 23,416,335 $ 22,181,442
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
March 31, March 31,
1996 1995
Revenues:
Net Resident Service Revenues $ 1,808,083 $ 1,319,531
Rental Income 766,588 812,436
Interest Income 45,728 16,741
Total Revenues 2,620,399 2,148,708
Expenses:
Resident Service Expenses 1,621,232 1,161,066
Interest Expense - Affiliate 0 637
- Other 179,155 203,164
Rent Expense 75,071 75,071
Property Management Fees-General Partner 9,475 10,050
General and Administrative - Affiliates 23,054 13,751
- Other 41,134 27,138
Depreciation and Amortization 187,957 185,597
Total Expenses 2,137,078 1,676,474
Operating Income $ 483,321 $ 472,234
Minority Interest in Net (Income) Loss
of Consolidated Subsidiary 9,304 4,571
Income Before Extraordinary Item $ 492,625 $ 476,805
Extraordinary Item
Lease Termination Settlement 1,293,464 0
Net Income $ 1,786,089 $ 476,805
Allocation of Net Income
Limited Partners $ 1,750,367 $ 467,269
General Partner 35,722 9,536
Total Income $ 1,786,089 $ 476,805
Net Income Per $1,000 Limited Partnership Unit
Income Before Extraordinary Item $ 16.09 $ 15.58
Extraordinary Item 42.25 0
Net Income $ 58.34 $ 15.58
Number of Limited Partnership Units 30,000 30,000
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
March 31, March 31,
1996 1995
Cash Flows from Operating Activities:
Net Income $ 1,786,089 $ 476,805
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 187,957 185,597
Minority Interest in Net Income (Loss)
of Consolidated Subsidiary (9,304) (4,571)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in
Accounts Receivable (291,240) 497,272
(Increase) Decrease in
Prepaid Expenses 8,745 (9,583)
(Increase) Decrease in
Restricted Cash 26,076 15
Increase (Decrease) in
Payable to Related Parties 7,499 10,003
Increase (Decrease) in
Payables and Accruals 304,079 67,682
Net Cash Provided by Operating
Activities 2,019,901 1,223,220
Cash Flows from Investing Activities:
(Additions) to Investment Properties (31,285) (24,980)
(Additions) to Construction in Progress (7,722) (4,950)
Net Cash Provided by (Used in)
Investing Activities (39,007) (29,930)
Cash Flows from Financing Activities:
Payments of Notes Payable (77,615) (570,307)
(Increase) Decrease in Deferred Debt Cost 0 (4,999)
Distribution to Partners:
Limited Partners (750,000) (750,000)
General Partner (15,305) (15,306)
Minority Interest (10,550) 0
Net Cash Provided by (Used in)
Financing Activities (853,470) (1,340,612)
Increase (Decrease) in
Cash and Cash Equivalents 1,127,424 (147,322)
Cash and Cash Equivalents at Beginning
of Period 1,626,628 1,202,175
Cash and Cash Equivalents at End
of Period $ 2,754,052 $ 1,054,853
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 180,370 $ 200,081
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Preparation
The unaudited financial statements presented herein have
been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and note disclosures
required by generally accepted accounting principles. These
statements should be read in conjunction with the financial
statements and notes thereto included in the Partnership's Form
10-K for the year ended December 31, 1995. In the opinion of
management, these financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to
summarize fairly the Partnership's financial position and results
of operations. The results of operations for the period may not
be indicative of results to be expected for the year.
Reclassification
Certain items in the 1995 financial statements have been
reclassified for comparative purposes to conform with the
financial statement presentation used in the 1996 statements.
Consolidation
The accompanying consolidated financial statements include
the accounts of the company and all of its subsidiaries.
Intercompany transactions and balances have been eliminated.
Minority interest is accounted for by using the equity method.
NOTE 2 - COMPENSATION, REIMBURSEMENTS, AND ACCRUALS FOR GENERAL
PARTNERS AND AFFILIATES:
The General Partner and affiliates are entitled to the
following types of compensation and reimbursement for costs and
expenses incurred for the Partnership for the three months ended
March 31, 1996:
Property Management Fees $ 9,475
General and Administrative Costs and Fees 23,054
Cash Distributions 15,305
NOTE 3 - INVESTMENT PROPERTIES
As of March 31, 1996 the Partnership owned, directly or
through limited partnership investments, an interest in eleven
nursing home properties.
A summary of the Partnership's investment properties is as
follows:
Operated Leased
Land $ 1,534,105 $ 3,148,638
Buildings 4,526,043 15,123,747
Furniture and Fixtures 1,276,934 4,041,185
Leasehold Interest 0 849,658
Investment Properties, at Cost 7,337,082 23,163,228
Less: Accumulated Depreciation
and Amortization (2,281,226) (9,134,379)
Net Book Value $ 5,055,856 $ 14,028,849
The Partnership, directly or through a manager, operates three
skilled nursing facilities. Paramount Chateau, a 99-bed facility
located in California, for the three months ended March 31, 1996,
had an average occupancy rate of 88% that was comprised of 7%
private, 10% Medicare, 70% Medicaid and 1% HMO. The average
reimbursement rates were $95, $245, $73 and $104 per day for
private, Medicare, Medicaid, and HMO, respectively. The average
monthly revenue was $392,400. Pacific Palms, a 99-bed facility
located in California, for the three months ended March 31, 1996,
had an average occupancy rate of 27% that was comprised of 2%
private, 4% Medicare, 12% Medicaid and 9% HMO. The average
reimbursement rates were $107, $161, $73 and $183 per day for
private, Medicare, Medicaid and HMO, respectively. The average
monthly revenue was $118,658. Olympic Healthcare, a 60-bed
skilled nursing facility with a 24-bed assisted living wing
located in Sequim, Washington, for the three months ended March
31, 1996, had an average occupancy of 94% that was comprised of
33% private, 10% Medicare and 51% Medicaid. The average
reimbursement rates were $96, $197 and $98 per day for private,
Medicare and Medicaid, respectively. The average monthly revenue
was $178,192. The 24-bed assisted living wing maintained an
average occupancy of 74% that was comprised of 31% private and
43% Medicaid. The average reimbursement rates were $55 and $55
per day for private and Medicaid, respectively. The average
monthly revenue was $29,446.
NOTE 4 - EXTRAORDINARY ITEM
On October 25, 1995, a Lease Termination Agreement was signed
by Cumberland Healthcare and FHP, Inc. relating to FHP-Norwalk
(f/k/a Rancho Los Padres) whereby Cumberland would receive an
early lease termination payment. A Management Agreement was also
signed whereby Cumberland would become the interim operator of
the facility. Pursuant to the Lease Termination Agreement,
$1,566,174 was placed in escrow, and payment was contingent upon
Cumberland obtaining the appropriate license to operate and
maintain the FHP-Norwalk facility. In January 1996, the state of
California - Department of Health Services issued a license to
Cumberland Healthcare to operate and maintain Pacific Palms
Skilled Nursing (f/k/a FHP-Norwalk, f/k/a Rancho Los Padres).
After various prorations, working capital advances and interest
earned, the net distribution from the escrow account to
Cumberland was $1,534,334 which is recorded as lease termination
settlement, interest income and deferred revenue for the period
ending March 31, 1996.
NOTE 5 - SUBSEQUENT EVENT
Cumberland Healthcare, L.P. I-A ("Cumberland") and Life Care
Centers of America, Inc. ("LCCA"), effective August 4, 1995,
entered into a Purchase and Sale Agreement pursuant to which LCCA
agreed to acquire seven nursing homes from Cumberland for an
aggregate purchase price of $17,900,000, subject to certain
prorations and adjustments. Cumberland owns six of these homes
and leases the seventh from an independent owner. The purchase
price paid by LCCA was as follows:
(a) LCCA assumed the indebtedness secured by a mortgage on
the Rimrock Facility of $1,263,431;
(b) LCCA delivered a purchase money note in the amount of
$1,000,000 guaranteed by its principal shareholder to the
Partnership ("the LCCA Note"). The LCCA Note matures on the fifth
anniversary of its issuance (May 29, 1996) but may be accelerated
at the option of the Partnership at the end of two years. A
portion of the accrued interest is payable monthly and the
balance is due on the maturity of the LCCA Note. However, if the
Partnership exercises its right to call the Note after two years,
the accrued interest which would otherwise be due at maturity
will be canceled;
(c) Funds were wired in the amount of $1,829,930 to payoff
the existing loan on the Sun City facility; and
(d) The balance of the purchase price (net of any prorations)
was paid in cash at closing by federal funds wire transfer to the
Partnership of $13,803,952.
Closing of the LCCA transaction was contingent upon approval
of the plan by a majority interest of the Limited Partners which
was obtained on May 8, 1996.
With the consummation of the sale this leaves Cumberland with
two 99-bed skilled nursing facilities in Southern California, a
100-bed skilled nursing facility in Ohio and half interest in a
60-bed skilled nursing facility in Washington, which also has a
24-bed assisted living wing.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net resident service revenues increased by $488,552 (37%) for
the three months ended March 31, 1996, as compared to the same
period in 1995. This increase is primarily due to the conversion
of Pacific Palms (f/k/a FHP-Norwalk, f/k/a Rancho Los Padres)
from a leased facility (FHP-Norwalk) to an operated facility.
Resident services expenses increased $460,166 (39.6%) for the
three months ended March 31, 1996, as compared to the same period
in 1995. This increase is due to an increase in nursing expenses
from the use of additional ancillary services needed to
accommodate the higher resident acuity level and the conversion
of Pacific Palms (f/k/a Rancho Los Padres) from a leased facility
(FHP-Norwalk) to an operated facility.
Rental income decreased by $45,548 (5.6%) for the three months
ended March 31, 1996, as compared to the same period in 1995.
This decrease is due to the conversion of Pacific Palms (f/k/a
FHP-Norwalk, f/k/a Rancho Los Padres) from a leased facility (FHP-
Norwalk) to an operated facility.
Interest income increased by $28,987 (173.1%) for the three
months ended March 31, 1996, as compared to the same period in
1995. This increase is due to increased cash balances in
interest bearing accounts.
Interest expense decreased by $24,646 (12.1%) for the three
months ended March 31, 1996, as compared to the same period in
1995. This decrease resulted from a reduction of the average
level of debt.
General and Administrative - Other expense increased by
$13,996 (51.6%) for the three months ended March 31, 1996, as
compared to the same period in 1995. This increase resulted from
increased legal and consulting fees relating to the negotiation
of the sale of seven nursing homes to LCCA.
General and Administrative - Affiliates increased by $9,303
(68%) for the three months ended March 31, 1996, compared to the
same period in 1995, due to a general increase in travel and
overhead of $3,793 and $4,500 that was credited to General and
Administrative for services provided outside the Partnership for
the same period in 1995.
Depreciation and Amortization expense increased by $2,360
(1.3%) for the three months ended March 31, 1996, as compared to
the same period in 1995. This increase is primarily due to the
completion of the laundry facility in January 1996 at Paramount
Chateau and subsequent depreciation.
The lease termination settlement under Extraordinary Item for
the period ending March 31, 1996, was $1,293,464 compared to zero
for the same period in 1995. This is due to the FHP early lease
termination payment in January, 1996 (see Note 4 Extraordinary
Item).
As a result of the above items, the Partnership's net income for
the three months ended March 31, 1996, is $1,786,089 as compared
to $476,805 for the same period in 1995, representing an increase
of $1,309,284 (274.6%).
The primary sources of funds for the period ended March 31,
1996, were rental income, revenues from nursing home operations,
the lease termination payment from FHP and collection of accounts
receivable. These funds were used to pay nursing home expenses,
make cash distributions to partners and reduce the amount of
outstanding indebtedness. As of March 31, 1996, the Partnership
has an interest in eleven nursing homes that have a net book
value of $19,084,705. Net book value is not necessarily
representative of market value.
In the opinion of the General Partner, there are no material
trends, favorable or unfavorable, in the Partnership's capital
resources. The resources will be sufficient to meet the
Partnership's needs for the next 12 to 24 months. These sources
include cash flows from operations, rental income and current
cash reserves.
Short-term liquidity requirements consist of funds needed to
meet commitments for debt service and administrative and
operational expenses. These short term needs will be funded by
cash at March 31, 1996, plus 1996 rental income, interest income,
and cash flows from operations. However, if the future changes
in the healthcare market would require extensive capital
expenditures by the Partnership in order for its facilities to
meet new licensure and/or marketplace standards, the Partnership
may be required to seek additional capital sources or increase
its long term debt in order to meet potential future expenditure
requirements. The General Partner is unable at this time to
predict the extent of future capital expenditure needs of the
facilities resulting from future changes in the nursing home
industry.
Mortgage obligations coming due within the next three (3)
years will be reviewed prior to their due dates. Based on the
Partnership's evaluation of each property and its corresponding
mortgage, current interest rates, availability of funds and other
relevant factors, each mortgage will be either refinanced, paid
off or the property abandoned. If needed for mortgage funding,
the Partnership has available income from rental property,
facility operational cash flows and current cash balances.
The cash balance at March 31, 1996 was $2,754,052. The
Partnership had net income of $1,786,089. After adjusting for
depreciation, amortization, and changes in operating assets and
liabilities, net cash provided by operating activities was
$2,019,901. The net cash used in investing activities was
$39,007, which includes fixed asset additions. The net cash used
in financing activities was $853,470 and consisted of principal
payments on notes payable, proceeds from notes payable, and
distributions to partners. Significant changes to the balance
sheet which affected the cash flow of the Partnership for the
period of March 31, 1996, were as follows: Accounts Receivable
increased by $291,248 primarily due to the start-up of operations
of Pacific Palms (f/k/a FHP-Norwalk, f/k/a Rancho Los Padres) and
its accounts receivable increasing from zero to $370,053. This
was due to delays in receiving licensing approval from the state
and Medicare which meant the billing for Medi-Cal and Medicare
could not be done until such approval had been received. Accounts
Payable and accruals increased by $302,897 at March 31, 1996, as
compared to December 31, 1995. This increase in payables is from
the start-up operation of Pacific Palms (f/k/a FHP-Norwalk, f/k/a
Rancho Los Padres) which caused payables to increase from zero to
$78,750, Paramount Chateau payables increased by $78,599 due to
better cash management, the property tax accrual increased by
$78,685, deferred patient revenue of $124,318 is consolidated
into the accounts payable and a decrease of $32,804 due to a
Medicare pay back from a cost report settlement. Investment
Properties increased by $105,609 as a result of the completion of
the laundry at Paramount Chateau at a cost of approximately
$75,000, the purchase of computer software for $6,000 and new
doors at a cost of $1,800. Various other purchases of furniture
and fixtures at Olympic Healthcare and Pacific Palms made up the
balance. Construction in Progress decreased by $66,602 due to
the completion of the laundry room renovation at Paramount
Chateau and the transfer of the cost to Investment Properties.
Mortgage Notes Payable decreased by $77,615 due to normal loan
amortization.
Cash distributions to Limited Partners were discontinued during
the first quarter of 1988 and resumed in February 1992. The 1995
distribution to Limited Partners totaled $1,500,000 (5% of the
original capital of $30,000,000). The February 1996 distribution
to the Limited Partners was $750,000 (2.5% of the original
capital of $30,000,000). None of these distributions represented
a return of capital. Future distributions will be at a level
that is warranted by the cash flow and profits of the
Partnership.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Report - None
(b) Reports on Form 8-K - Report filed June 13, 1996
Date of Event, May 29, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
CUMBERLAND HEALTHCARE, L.P. I-A
By: Medical Investments Partners
By: RJ Health Properties, Inc.
Managing General Partner
Date:06/28/96 By: /s/Fred E. Whaley
President and Director
Date:06/28/96 By: /s/J. Davenport Mosby,III
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarter ended March 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,787,248
<SECURITIES> 0
<RECEIVABLES> 1,070,124
<ALLOWANCES> 73,373
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 30,508,032
<DEPRECIATION> 11,415,605
<TOTAL-ASSETS> 23,416,335
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,524,906
0
0
<COMMON> 0
<OTHER-SE> 12,995,822
<TOTAL-LIABILITY-AND-EQUITY> 23,416,335
<SALES> 0
<TOTAL-REVENUES> 2,620,399
<CGS> 0
<TOTAL-COSTS> 1,696,303
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179,155
<INCOME-PRETAX> 1,786,089
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,786,089
<DISCONTINUED> 0
<EXTRAORDINARY> 1,293,464
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 42.25<F2>
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>EPS is net income per $1,000 Limited Partnership unit.
</FN>
</TABLE>
